Home Equity

HELOC Rates For August 17, 2022: 10-Year HELOC Rates Hit A New High – Forbes Advisor

· What Are Current HELOC Rates? ; 10-year HELOC, 6.09%, +0.13%, $126.88 ; 20-year HELOC, 7.36%, +0.21%, $153.33

The average rate on a 20-year HELOC (home equity line of credit), hit a new high—6.09%, according to Bankrate.com. At the same time, the rate on a 20-year HELOC is 7.36%, up 21 basis points from last week.

Home equity lines of credit let homeowners convert their equity—the appraised value of the home minus anything owed to the mortgage lender—into cash. Often referred to as HELOCs, these products offer owners the flexibility to make use of cash only as needed, and to pay interest only on what’s used.

Related: Best Home Equity Loan Lenders

What Are Current HELOC Rates?

10-year HELOC Rates

The interest rate for a 10-year HELOC averaged 6.09% this week. That’s a slight jump from the previous week, when it was 5.96%, and from its lowest point over the last 52 weeks, when it was 2.55%.

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At today’s interest rate of 6.09%, during the draw period, a $25,000 10-year HELOC would cost approximately $127 per month during the 10-year draw period.

After the draw period, there is a repayment period during which time the interest rate may rise. HELOCs have variable interest rates, unlike home equity loans, which are taken out as a lump sum. They have repayment periods that can be equal to or different than the draw period. Generally, a HELOC’s term is the same as its repayment period—a 10-year HELOC gives you 10 years to pay back the loan.

Generally, a borrower pays only interest during the draw period, but they can also repay their principal during that time if they wish.

20-year HELOC Rates

This week’s average interest rate for a 20-year HELOC is 7.36%, versus 7.15% last week. That compares to the 52-week low of 5.14%.

Read more: Equity Formula (Definition) | How to Calculate Total Equity?

At the current interest rate, a $25,000 20-year HELOC will cost you $153 per month during the draw period.

HELOC Rate Insights

With the Federal Reserve raising its fed funds rate, borrowers may see HELOC rates move higher this year. Typically, HELOC rates move in step with rate increases by the Fed.

Currently, the 52-week high on a 10-year HELOC is 6.09%, while the 52-week low is 2.55%. The 52-week high on a 20-year HELOC is 7.51% and the 52-week low is 5.14%.

HELOCs vs. Home Equity Loans

HELOCs are a form of credit called a revolving loan. That means a borrower can draw only what’s needed against the line of credit, pay that back and then draw again, repeating that process over the life of the loan.

Read more: What Is a HELOC and How Does It Work? | LendingTree

That differs from a home equity loan, which is a lump-sum amount that’s borrowed and paid back in regular installments. Home equity loans also carry fixed interest rates, while lines of credit are variable—and may rise during the period in which a borrower needs to make payments.

That’s especially true now since the Federal Reserve intends to raise interest rates several times in the coming months and years. That may make a home equity loan, or another fixed-rate product, a better option.

How to Find the Best HELOC Rate

When applying for a HELOC, it probably makes sense to start your search with the lender who holds your first mortgage, if you have one. You will want to get some comparisons though, which you can do by applying online for a prequalification. That should give you a sense of lenders’ terms and interest rates, as well as their fees.

Rates for HELOCs are set based on the prime rate, which is what banks and other financial institutions charge the most creditworthy borrowers. The prime rate is derived from the federal funds rate, which is set by the Federal Reserve.

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